Sunday, 30 September 2012

NMart accused sent to judicial custody in jail

Prakasam district police who arrested the four accused persons who hold key positions in NMart brought them and presented them before the judicial magistrates of Chirala and Kandukuru.
Md Saleem Khan, one of the directors of the fraudulent company NMart was presented before the judicial magistrate of Chirala and the magistrate sent him to judicial custody for 14 days.
Likewise, Chief Executive Officer Akhil Patrawala, Human Resources head Hiren Devani, Business head Pratik Desai were presented before the judicial magistrate of Kandukuru. The magistrate sent the accused persons to 14 days judicial custody.
Meanwhile, the key accused in the Rs. 1400 crore scam, Gopal Singh Shekhawat continues to play hide and seek with the police.
It may be recalled that Corporate Frauds Watch filed a criminal complaint against the fraudulent company NMart a.k.a. Newlook Retails Pvt Ltd for indulging in money circulation scheme in the name of selling products.

Friday, 28 September 2012

Police arrest CEO, Director, HR Head, Business Head of Nmart

Prakasam district police arrested one of the directors of NMart Md. Saleem Khan, Chief Executive officer Akhil Patrawala, Head of Human Resources Hiren Devani, Business head Pratik Desai. The accused persons would be presented in the judicial magistrate court. Kandukuru CI Akkeswara Rao and Chimakurti SI Muralikrishna arrested the accused.
However, the chief of NMart Gopal Singh Shekhawat is still at large and police issued a lookout notice for him. It may be recalled that NMart a.k.a. Newlook Retails, indulged in money circulation scheme in the name of selling products offering astronomical returns in a short span of time. Corporate Frauds Watch, Vijayawada-based civil society organisation, lodged a complaint with the police of Kandukuru about the illegal activities of the company.
However, after the police registered a criminal case and went to arrest Gopal Singh Shekhawat, on the promise of presenting himself before judicial magistrate at Ongole, he secured bail but jumped the bail. Thereafter, police have been searching for the fugitive Gopal Shekhawat.
Meanwhile, NMart filed a couple of writ petitions in Andhra Pradesh High Court but the high court refused to entertain any relief to the accused including anticipatory bail to the kingpin Gopal Singh Shekhawat. NMart could not convince the judiciary that its business model is legal. It also could not convince the judiciary how they are going to give returns of more than hundred per cent in four years. They also could not explain how they are going to extend various gifts like computers, motorcycles, luxury cars and even foreign trips to the members if they enroll more members.
That is why Gopal Singh Shekhawat is hiding in some obscure place avoiding the arrest.

Tuesday, 25 September 2012

The Bosses of 'Herbalife' have been robbing the Grameen Bank via its customers

Professor Muhammad Yunus is a Bangladeshi economist who, in 1976, attempted to tackle the problem of world-poverty by founding the Grameen Bank. This common-sense institution now distributes more than $100 millions of low interest, small (or micro-credit) loans annually, to persons (mostly women) without collateral, in order to help them to escape the poverty-trap by starting their own businesses and achieving financial self-sufficiency. Muhammad Yunus was awarded the Nobel Peace Prize in 2006, along with Grameen Bank, for their campaign to create economic and social development around the world. 

Muhammad Yunus U.S. President Barack Obama (R) presents the Medal of Freedom to Professor Muhammad Yunus, founder of the Grameen Bank, during a ceremony in the East Room of the White House August 12, 2009 in Washington, DC. Obama presented the medal, the highest civilian honor in the United States, to 16 recipients during the ceremony.

Amongst many other international awards, Muhammad Yunus received the Presidential Medal of Freedom from Barack Obama, in 2009.

Although technically it is not classified as a bank in the USA (because it can't accept deposits from the public), in 2008, Grameen America opened its first Branch in the New York borough of Queens. This was followed in 2009, with a branch in the South Side of Omaha, Nebraska, where almost all borrowers have been unemployed, women immigrants from Latin America. 

It has recently been reported that many of the poor women who received their initial $1500 loans from Grameen America in New York and Omaha, have been persuaded to pour this borrowed-cash into 'Herbalife' and other 'MLM income opportunity' frauds, believing that they were going to achieve total financial freedom through buying a quota of products each month whilst recruiting their friends and relatives to duplicate the same endless-chain plan. In this way, numerous empty stores in Omaha were transformed into so-called 'Herbalife Nutrition Clubs.' These were typically draped with green curtains and decorated with posters of soccer stars who play for clubs sponsored by 'Herbalife.' Sadly, a number of these so-called 'Herbalife Clubs' have already vanished and the loans which were used to create them, have not been repaid.

'Herbalife income opportunity' propaganda  from the UK

In reality, all so-called 'MLM income opportunies' have been dissimulated closed-market swindles (i.e. without a significant or sustainable source of revenue other than that deriving from their own contributing participants, due to the fact that 'MLM' products have always been effectively-unsaleable on the open market). Classically, other than an insignificant minority of schills at the top of these pyramids, all so-called 'MLM income opportunities,' have had an 100% rolling loss/churn rate, whilst this key-information has been deliberately hidden from the public by their instigators.

Until recently the Grameen Bank has operated a policy of trusting its clients to make their own choice of business. However, for obvious reasons, certain Grameen staff have belatedly begun to advise their American borrowers not to get involved with 'Herbalife' in particular, and  with 'MLM' in general.

It is interesting to note that the US federal government's Small Business Administration (without actually naming any so-called 'MLM' companies, because that is forbidden by law) specifically lists all 'pyramid sales plans' as being ineligible for financial assistance; describing them as:

... 'plans, where a participant's primary incentive is based on the sales made by an ever-increasing number of participants. Such products as cosmetics, household goods, and other soft goods lend themselves to this type of business.'

David Brear (copyright 2012)

Sunday, 23 September 2012

Madras High Court held in V-Can Network case MLM is a fraud played on hapless, innocent public

In a land mark judgement the Madras High Court in Writ Petition No. 2908 and Writ Petition No.4144, W.P.M.P.Nos. 3650 and 5221, W.P.No. 2908 all of 2003, stated that the V-Can Network (P) ltd is indulging in money circulation scheme in the name of selling products.
One look at the facts of the case reveals that there are striking similarities between the present NMart and V-Can Network in the business model with only difference that former has set up retail shops all over the place.
Let us get into the details of V-Can Network. A case in Crime No.42/2003 was registered on 24-01-2003, under Sections 420 and 506 (1) I.P.C.; under Sections 4, 5 and 6 of Prize Chits and Money Circulation Schemes (Banning) Act, 1978; under Section 15 of Indian Medical Council Act; under Sections 3 and 4 of Drug and Magic Remedies Objectionable Advertisement Act, 1978 by Central Crime Branch, Chennai City Police, based on a complaint given by one Jayaraman of Chennai.
The allegation in the complaint is that one Senthil Murugan, who had become a member and who had bought a magnetic bed, falsely induced the complainant that if he purchases a magnetic bed for Rs.5,990, he would in turn become a member and if he in turn introduces two more members, he would make quick money to the tune of lakhs of rupees and thereby cheated the complainant.
As per definition 2 (c), money circulation scheme or multi-level marketing or whatever by name called, is a fraud being played on the hapless and innocent public by way of manipulation and deceit. It is the case of the respondents that inferior quality products are sold with false claims at exorbitant rates while the products are worthless and thereby they cheat the public.
Likewise, the members/distributors are falsely induced by selling inferior products at exorbitant rates which are worth nothing and in turn for them to make quick or easy money.
The members/distributors have to falsely induce more members. It is demonstrated before me that as per that scheme, every member/distributor has to be necessarily enrolled with a membership fee which is taken by the petitioner/promoter to buy their products and each member/distributor has to falsely induce and enroll more members and if that is done, he gets a minor share of the ill-gotten wealth and thereby the chain continues. The intention of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 was to prevent white collar crimes being perpetrated on hapless and innocent public. It is the case of the respondents that the preliminary investigation prima facie discloses that the petitioner/promoter company is involved in money circulation scheme, thereby whatever money is paid to a member/distributor is money paid by the members themselves to a minor extent and the major part is illegally kept by the petitioner/promoter company by false inducement and false representations.
It is also demonstrated that unless the member/distributor falsely induces others to become members/distributors, they cannot make quick or easy money and the money paid or circulated as commission or incentive is only the ill-gotten money made from other members/distributors and the chain continues by manipulation and deceitful false claims.
Learned senior counsel for the petitioner has contended that though this system already existed in this country and multi-national companies are doing the same business, the petitioner-VCan Network alone was singled out and the police have taken action against them.
For this, the learned Government Advocate has brought to notice that they have already taken action against promoters of Cymbolic Multi-crore company and arrested the persons concerned. It is also stated that their bail applications were dismissed. He also brought to notice that apart from this, a case has been registered in Crime No. 230/2003 on the file of Inspector of Police, Central Crime Branch, Chennai against Japan Life company which is also indulging in the sale of magnet beds and about 80 persons have already been arrested and later released on bail. The above particulars show that there is no mala fide intention on the part of the respondents and there is no basis for the allegation that action was taken against the petitioner alone.
Though the V-Can Network management claims innocence and their business being lawful, the same has to be ascertained only after thorough investigation, final report, trial, evidence and judgment and in such a circumstance, the grievance expressed by V-Can Network and the distributors cannot be gone into in a writ jurisdiction under Article 226 of the Constitution of India. It is needless to mention that it is open to them to put-forth their defence before the appropriate forum/Court if their business/activities are lawful.
In such circumstances, since the investigation is at the crucial stage, any interference in the investigation will seriously hamper and prejudice the investigation.
This Court hoped that the Investigation Agency will undertake the task promptly and complete the same expeditiously. With the above observation, both the Writ Petitions are dismissed.

Thursday, 20 September 2012

Don't fall for promises of easy and quick money

Many people are arguing in this blog that why I have taken so much time to set the law in motion. Some others want a regulatory mechanism to bring order in multilevel marketing. 

When the law clearly says that becoming a member and enrolling others to become members in such schemes is prohibited under the provisions of Prize Chits & Money Circulation Schemes (Banning) Act, 1978, 1978, what is the point to have a regulatory mechanism to make an illegal act legal. It is an open illegal money circulation scheme.

I have made it clear several times, many people who join in these schemes want to earn easy and quick money though they know it is a crime. I have heard at one NMart retail shop, that NMart is going to file a writ petition in the High Court, and we could continue for sometime. It means that they know well that they are cheating their own friends and relatives to join such scheme. 
That is why people are vociferously raising their voice against me and even casting aspersions on my action.
Andhra Pradesh High Court in its judgement in the writ petition filed by speakasiaonline pointed out that "The first contention raised by the learned Senior Counsel is that First Information Report can be registered only on commission of an offence. It is true that First Information Report is to be registered on commission of an offence, more particularly, for a cognizable offence. Once a cognizable offence is committed, First Information Report can be registered. But at the same time, some of the provisions in the law enable the Investigating Agency to register First Information Report for mere preparation alone, for example, Sections 120-B, 399 of IPC and 7(1)(a) of the Criminal Law Amendment Act. Further, whether an offence committed or not always depends upon the ingredients mentioned in the provision of law. Some provisions in the penal laws made the preparation also as an offence. When the provision deals the preparation as an offence, the preparation itself is commission of offence."
The Supreme Court in its judgement in AR Antulay vs. RS Nayak (AIR  1984 SC 718) case stated that "Crime is a wrong against the society at large and therefore, as a general rule, any person having knowledge of the commission of an offense may set the law in motion by a complaint."
It is clear here that a person need not be a victim to lodge a complaint and anybody could complain whenever a crime takes place.
In the speakasiaonline case also, the racketeers raised the same question that the complainant made unjust demands and when it was not met, he lodged a complaint.
The High Court has looked whether there was prima facie offence in the complaint and when the crime was found it dismissed the writ petition.
This is exactly what is going to happen in the case of writ petition filed by the NMart.
In fact, the first complaint was lodged with the police way back in 2010 and had the police taken action at that time, the NMart would not have grown to this extent. Many people would have been saved. Now everyone is going to lose their hard-earned money. I really feel sorry for them. Many of them were lured by easy and quick money and high returns. Even today they strongly believe that they are going to earn a lot of money as per the promises of Gopal Shekhawat.
People should realise that it is a crime to join such schemes and that the friends and relatives they have joined in such schemes would never believe them in future if they suffer loss. If the mutual trust is lost, the society would collapse.
I appeal to the people all over world not to join such multilevel marketing companies and cause damage to the social fabric of our closely knit society.

Tuesday, 18 September 2012

Gopal Shekhawat's writ petition posted next week

In a sudden twist of the story, the NMart writ petition No. 27101 filed by NMart racketeer Gopal Singh Shekhawat seeking relief from the Andhra Pradesh High Court has reached the Bench of Justice K C Bhanu on Monday afternoon.
However, the counsels of both sides could not reach the court probably thinking it won't reach the bench in time.
But it did reach and since both the counsels did not appear, the Honourable Bench adjourned the hearing for one more week.
In effect, Gopal Singh Shekhawat has to wait for one more week sitting in some rat hole to learn that his writ petition was dismissed. Anyway, the petition would be dismissed once the judge hears how shallow was the argument and how the huge money was amassed by the accused in a short span of two years.
Meanwhile, the Corporate Frauds Watch filed its vakalathnama in the High Court to present its version of the daylight robbery indulged in by the accused persons in the now infamous criminal case.
It is already reported that the Police from Prakasam district are leaving no stone unturned to trace the whereabouts of Gopal Singh Shekhawat and his wife Pratibha who preferred to hide in some mysterious place.
Sources said that the police suspect that Gopal Singh might have left the country to hide in some foreign country though it is not yet confirmed.
Anyway, since he stashed a lot of money, he could comfortably settle anywhere in the world without bothering about the people whom he had cheated up to billions of rupees.

Monday, 17 September 2012

Prakasam police identify properties of NMart racketeer after Gopal Singh Shekhawat and his wife gone underground

Prakasam district police under the dynamic guidance of superintendent of police Dr Raghuram Reddy identified the properties of the NMart money circulation scheme racketeer Gopal Singh Shekhawat in Surat and other areas.The SP said that some of the properties of the accused who has been absconding after the Borivali magistrate, Mumbai, issued non-bailable warrant for his arrest were identified and efforts are on to confiscate the properties. He said that the police have identified a helicopter bought by the accused Gopal Singh Shekhawat with the ill-gotten money which was parked in Mumbai and seized it. It may be recalled that in the name of retail business, the accused Gopal Singh Shekhawat indulged in money circulation scheme and amassed about Rs. 1400 crore in a short span. The police had already seized several cars and two-wheelers owned by him. According to police, the cases were filed against the accused Gopal Singh Shekhawat and his wife and others under Section 420 of IPC, Sections 3,4,5 of Prize Chits & Money Circulation Schemes (Banning) Act, 1978 and the AP Protection of Depositors Act. The modus operandi of the racket is simple. By paying Rs. 5500 one has to become a member and he would be given 48 coupons each worth Rs. 220 to be exchanged with products in the next 48 months in the retail shop owned by the accused. More, the members would be paid Rs. 200 per each enrollment of new member into the scheme. In addition to the incentive of Rs. 200, the members were promised attractive prizes like motorcycles, cars, computers, foreign trips if they enrolled more than 50 to 1000 members into the scheme. Corporate Frauds Watch, a Vijayawada-based voluntary organisation lodged a complaint with the police station at Kandukuru, Prakasam district. The Kandukuru circle inspector Akkeswara Rao had taken up the investigation and apprehended the accused and his wife. After obtaining the bail from the Mumbai court, the accused was absconding since then. CI Akkeswara Rao, said that a helicopter belonging to accused was seized at Mumbai. The accused and his wife were at large and efforts are on to identify his whereabouts, he said. Meanwhile, the reports from various States said that the irate members attacked the NMart retail stores and took away whatever they could from them. The NMart has nearly 150 retail outlets through out the country. Almost all the shops are now closed. Some people, who refused to be identified, lamented that they had paid huge amounts as membership in the hope that it would fetch huge returns in future. The members have to pay Rs. 5500 per membership, but these people out of greed for huge returns have taken multiple memberships.

Sunday, 16 September 2012

Multilevel Marketing squarely falls within the definition of ‘Money Circulation Scheme’: Madras High Court

The Madras High Court way back in its judgement of 2004, notwithstanding the claims of multilevel marketing companies, held that multilevel marketing, network marketing, referral marketing are nothing but illegal money circulation schemes.In its judgement while hearing a writ petition filed by the Apple FMCG in 2004, the Madras High Court even commented:
It is true that several companies including Multinational Companies carry on the business of the “Multilevel Marketing” and it is also true that the Executive and the law enforcing authorities keep a blind eye on such activities. This also does not make an illegal act legal. It is always a fact that the law enforcing authority would try to close the stable only after the horse had escaped.” (Para 22).
Justice A Rajan speaking on behalf of the Bench, stated that in this part of India, people are gullible and fall an easy prey to the tall promises made through the media. That was the reason why the lottery tickets were sold in large numbers in the State. Many companies want to exploit this attitude of people and float many schemes and lure the people to join the schemes.
The petitioner is not entitled for direction for prohibiting the authorities from keeping surveillance over any meeting. Sec. 7 of the Act confers the right on the police officer to enter any premises, where he has got a reason to suspect that the premises are being used for purposes connected with the promotion or conduct of any prize chit or money circulation scheme in contravention of the provisions of the Act. (Para 33).
The Madras High Court held that mere fact no complaints were received does not make an act legal, if it be otherwise illegal. It is true that no service fee is collected by the petitioner for registration. It is also true that the commission that is received by the distributor depends upon the volume of business generated by him. From the scheme of Multilevel Marketing, as reflected in the brochure issued by the petitioner, the commission is received only if the distributor sells the product, which he purchases, to two others and those two persons sell it to two other persons each and those four persons sell similarly to two persons each.
In this manner, if more number of persons in the next stages come into this scheme, the person through whom those persons got enrolled gets commission. "Receipt of any money or valuable thing as the consideration or a promise to pay money, on any event or contingency relative or applicable to the enrollment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions.” The above definition makes it clear that any scheme by whatever name it is called whereby on a promise that one would receive or would make quick or easy money by enrollment as members into the scheme is ‘money circulation scheme’.
In this case, Justice A Rajan said that the contention of the petitioner is that there is no chain of customers. This contention appears not acceptable. The scheme, as stated above, creates chain of customers and only when the chain progresses without any break in any of the links, the ‘principal distributor’ gets more commission. If, for any reason, the chain is broken, at any stage, then the principal distributor’s commission would get reduced proportionally to that extent. Therefore, it is not correct to say that there is no chain of customers in the process. Section 2(c) of the Prize Chits and Money Circulation Schemes(Banning) Act, defines ‘Money Circulation Scheme’, as follows: “Money circulation scheme” means any scheme, by whatever name called, for the making of quick or easy money, or for there, there is enrollment of members into the scheme; there is also a promise made that on such enrollment of large number of persons into the scheme, one would make quick money or easy money. There cannot be any doubt that by enrolling new members and by the process of selling the goods to new distributors this chain progresses; the person who became such members earlier get commission without doing any work; getting such a commission is nothing but getting quick or easy money. Therefore, such schemes the so called ‘Multilevel Marketing’, definitely falls within the definition of ‘money circulation scheme’. The event is enrollment of new members; the commission received is relative to such enrollment of new members into scheme. Therefore, the argument of the learned counsel for the petitioners that there is no promise of quick or easy money is not correct for the reasons stated above. Thus, the so-called Multi-level Marketing, though called by a very attractive name squarely falls within the definition of ‘Money Circulation Scheme’ under the Act. Hence, it is prohibited by the Act. It is for the law enforcing authorities to take appropriate action.

Saturday, 15 September 2012

India needs an intellectually-rigorous, and accurate, definition of 'lawful direct selling'

I notice that (without offering to produce any quantifiable evidence to support their anecdotal claims) certain intellectually-castrated Indian adherents of 'NMart' keep bleating that 'MLM' is perfectly lawful, whilst other correspondents of Corporate Frauds Watch have politely asked: How can 'NMart' be reformed? 
Hopefully, the legislators tasked in the republic of India with drawing up a new definition of 'lawful direct selling,' will take note of what has been happening in the USA, where 'MLM/Prosperity Gospel' rackets have spread like cancers, and where (to date) they have only been challenged by less-than-intellectually-rigorous, and/or corrupt, trade regulators who have allowed billionaire-criminals to write their own inaccurate definition of 'lawful direct selling.' 
I have previously described this tragi-comic situation as the equivalent of trying to stop the spread of the 'Nazi' lie, by asking the governing body of the Boy Scout Movement to keep an eye on the 'Hitler Youth.'
Your free-thinking readers should be aware that a common-sense, but effectively-toothless, new US Federal Trade Commission 'rule' was introduced at the start of 2012 which requires anyone in the USA selling a 'business opportunity (other than a so-called 'MLM') to supply anyone buying that 'business opportunity,' with a one page disclosure-form which must include:
  • evidence to support any earnings claims
  • a list of any previous legal actions against the sponsoring company
  • a declaration of the sponsoring company's cancellation/refund policy 
In other words, although they are obviously not described in accurate deconstructed terms by current FTC officials, this 'business opportunity rule' specifically excludes blame-the-victim 'MLM Prosperity Gospel' cults from regulation and has effectively-placed their bosses above the rule of law in the USA.
Sadly, FTC agents have completely failed to recognise 'Prosperity Gospel' cultism as a form of major, ongoing racketeering activity, because the FTC has itself foolishly allowed the instigator/leaders of these gangs lawfully to register their unlawful activities as 'direct selling/MLM' companies - 'Amway', 'Herbalife', 'NuSkin', 'Xango', etc. However, in the adult world of quantifiable reality, no evidence exists (in the form of audited accounts; particularly, income-tax payment receipts) proving that a significant number of the constantly-churning adherents of any of these organizations (which all have exhibited the universal identifying characteristics of a cult) has ever received an overall net-income from lawfully-retailing goods, and/or services, directly to the general public for a profit.

To add insult to injury, the following non-specific statement had previously been made by David Vladeck, the current  US FTC Director Bureau of Consumer Protection:
'The victims of these (business opportunity) frauds are our neighbours - people who are trying to make an honest living... they risked their limited financial resources in the response to the promise of a job or an income - a chance at a profitable home-based business. But these turned out to be empty promises - and the people who counted on them ended up with high levels of frustration and even higher levels of debt.'
David Vladeck's largely-empty rhetoric was also repeated by another leading FTC attorney, Eileen Harrington. Obviously, it is a perfect description of 'MLM income opportunity' fraud, but these laudable words were part of the FTC's ironically-titled initiative, 'Operation Empty Promises' which, unbelievably, has not targeted any of the most-pernicious 'MLM' mobs.
Meanwhile, the US Dept. of Justice, which (due to its previous, let's turn a blind-eye to all businessmen, policy) is now sinking in a sea of fraud, has recently announced the following impressive-sounding initiative - a 'consumer protection working group to combat consumer fraud.' In plain language, this translates as: large numbers of US Justice Dept. attorneys now have a further pretext to keep holding 'conferences' at the expense of their employers (the public) whom they have failed to protect.
Judging by their previous, shameful track-record, legally-qualified, senior US government officials, would appear to be some of the last people in America who should be tasked with coming up with solutions to fraud. Self-evidently, the only common-sense legislation which could have halted blame-the-victim 'MLM Prosperity Gospel' cultism in the USA many years ago (and before it became a global problem), would have been to have made it a fundamental requirement for the instigators of all alleged 'direct selling/income opportunities' to produce quantifiable evidence to prove that they have had a significant and sustainable source of revenue other than that deriving from their own participants. Had such common-sense legislation been enacted, and rigorously enforced, then (since 1970) if the instigators of any alleged 'direct selling/income opportunity' had been unable to produce such elementary proof of the economic viability, and legality, of their alleged 'commercial' activities, they could have been immediately arrested by FBI agents, their labyrinths of counterfeit corporate structures closed-down and all their illegally-acquired assets seized, under existing RICO legislation. 
Once you understand that all so-called 'MLM' companies have been cultic Trojan Horses, it is a pointless exercise examining their reality-inverting 'commercial' exteriors. The blindingly-obvious common-sense questions which have never been put to the officers of the so-called 'Direct Selling Association' by either the American mainstream media or by US law enforcement agents, are:
  • Exactly how many US citizens have signed up for so-called 'MLM income opportunities' overall, and exactly how many overall have got back more than they paid in
  • Out of all the alleged 'multi-billion dollar direct retail sales ' claimed by you and your member companies in the USA down the years, exactly what percentage have been authentic, external, retail transactions to members of the general public for a profit, rather than internal transactions between your member companies and their many millions of alleged 'business owners,' but which have been laundered as 'retail sales' by you, and by your member companies, in order to dissimulate the operation of closed-market swindles from which the ill-informed ordinary contributors cannot have hoped to receive any more money than they paid in?
  • Excluding all your own member companies' documentationand that issued to their alleged 'distributors,' what quantifiable evidence can you produce proving that any of your member companies' alleged 'Multi-Level Marketing income opportunies' have actually had any significant, and sustainable, external source of revenue other than that deriving from their own participants?
Although it remains unthinkable to many people, a large part of the so-called 'direct selling industry,' which recently boasted '$28.56 billions of annual retail sales in the USA,' can be proved to have been nothing more than the 'corporate'-front for a collection of blame-the-victim 'MLM/Prosperity Gospel' cults which have been running some of the most extensive, and outrageous, dissimulated, closed-market swindles in history. 
For a long time, it has not been in the interests of the US Justice Dept. to face up to this ugly reality, because 'MLM' racketeers have greased the palms of a remarkable number of key persons, and organizations, in the American establishment (particularly, leading members of the Republican party). Indeed, the ultimatedream of 'MLM' racketeers (to have the protection of the sitting US President), might soon be again turned into a nightmare reality. 
David Brear (copyright 2012)

Friday, 14 September 2012

'NMart,' 'MLM income opportunity' fraud - a new form of Imperialism.

'MLM income opportunity' racketeer, Gopal Shekawat
Shyam Sundar's Corporate Frauds Watch Blog has recently been alive with intellectually-castrated victims of the Indian-based 'MLM Income opportunity/ Prosperity Gospel' cult known as 'NMart',instigated by racketeer, Gopal Singh Shekawat a.k.a. 'Gopalji.' Some of these indignant correspondents are obviously fakes, but others are so deluded that they actually believe that Shyam Sundar is the paid agent of 'NMart's' enemies and that they, and their children, will starve if 'NMart' is closed.

Nmart Gopal Shekhawat arrested

Meanwhile, in the adult world of quantifiable reality, at the end of last month, Gopal Shekawat was arrested in Surat by police officers from Andhra Pradesh, as a result of Shyam Sundar making legitimate complaints (on behalf of the Indian public) that Shekawat, and his associates, have been stealing money from many thousands of people by running a dissimulated money circulation scheme. Shekewat was subsequently released on bail, but he then  failed to present himself to a Judge September 1st, and consequently he is now a fugitive. 
Shyam Sundar has kindly supplied the following clarification which I think clearly demonstrates that Gopal Singh Shekhawat is no ordinary charlatan; for Shekhawat exhibits the diagnostic criteria of severe and inflexible Narcissistic Personality Disorder:

Gopal Singh Shekhawat was arrested by the Andhra Pradesh police in Surat. However, on the way, the police presented him in Borivali magistrate court, Mumbai, for obtaining prisoner transit warrant popularly known as PT Warrant. However, a large group of advocates descended on the magistrate court on behalf of the accused, Gopal, and appealed to the magistrate that he would not run away and he would present himself before the Ongole court on or before September 1st. On the condition that he would present himself before the Ongole magistrate, the Borivali court in Mumbai set him free on bail with an amount of Rs. 20,000 and two sureties of like amount. 
However, Gopal did not present himself before the Ongole magistrate on September 1st. Moreover, he preferred to file two writ petitions in Andhra Pradesh High Court - one civil and the other criminal.
In the civil petition, Gopal appealed to the High Court to direct the police not to interfere in his lawful business. Justice K C Bhanu refused to give any stay order on the investigation and posted the matter after  three weeks. He issued notices to the Andhra Pradesh State Government, the Director General of Police, the  Kandukuru Circle Inspector of Police, Prakasam district and Corporate Frauds Watch to file their affidavits presenting their case. The HC Justice while refusing to give stay order on the investigation even for a week, said that the crimes mentioned in the FIR are serious and under these circumstances the court has to listen what the complainant and the police have to say in this regard.
In the criminal petition, the accused, Gopal,  appealed to Justice Samudrala Govindarajulu to grant him anticipatory bail to prevent the police from arresting him. After hearing the Government pleader, the Judge said that the anticipatory bail could not be granted as the accused had already jumped the bail.
Meanwhile, Pratibha  Singh Shekhawat, wife of Gopal, filed a quash petition in the Bombay High Court appealing to the court to quash the FIR registered against her by Andhra Pradesh police.
The laughable thing is that the Bombay High Court has no jurisdiction to quash the FIR filed by Andhra Pradesh police. Only Andhra Pradesh High Court has jurisdiction.
The Andhra Pradesh police had frozen the accounts of NMart all over the State and all transactions came to a standstill.
The accused, Gopal, has turned fugitive running away from law. If he has any respect for law, he would have presented himself before the Ongole magistrate.
This is exactly what happened so far.
Shyam Sundar

‘Narcissistic Personality Disorder,’ is a psychological term first used in 1971 by Dr. Heinz Kohut (1913-1981). It was recognised as the name for a form of pathological narcissism in ‘The Diagnostic and Statistical Manual of Mental Disorders 1980.’ Narcissistic traits (where a person talks highly of himself/herself to eliminate feelings of worthlessness) are common in, and considered ‘normal’ to, human psychological development. When these traits become accentuated by a failure of the social environment and persist into adulthood, they can intensify to the level of a severe mental disorder. Severe and inflexible NPD is thought to effect less than 1% of the general adult population. It occurs more frequently in men than women. In simple terms, NPD is reality-denying, total self-worship born of its sufferers’ unconscious belief that they are flawed in a way that makes them fundamentally unacceptable to others. In order to shield themselves from the intolerable rejection and isolation which they unconsciously believe would follow if others recognised their defective nature, NPD sufferers go to almost any lengths to control others’ view of, and behaviour towards, them. NPD sufferers often choose partners, and raise children, who exhibit ‘co-narcissism’ (a co-dependent personality disorder like co-alcoholism). Co-narcissists organize themselves around the needs of others (to whom they feel responsible), they accept blame easily, are eager to please, defer to others’ opinions and fear being seen as selfish if they act assertively. NPD was observed, and apparently well-understood, in ancient times. Self-evidently, the term, ‘narcissism,’ comes from the allegorical myth of Narcissus, the beautiful Greek youth who falls in love with his own reflection.

Currently, NPD has nine recognised diagnostic criteria (five of which are required for a diagnosis):
  •       has a grandiose sense of self-importance.
  •       is preoccupied with fantasies of unlimited success, power, brilliance, beauty, ideal love, etc.
  •       believes that he/she is special and unique and can only be understood by other special people.
  •       requires excessive admiration.
  •       strong sense of self-entitlement.
  •       takes advantage of others to achieve his/her own ends.
  •       lacks empathy.
  •       is often envious or believes that others are envious of him/her.
  •       arrogant disposition.


I have to say that 'NMart' is one of the most obvious 'MLM income opportunity' frauds, I have ever examined. Its instigators have openly admitted that in order to make money in 'NMart,' participants don't have to retail anything to the public for a profit. On the contrary, all they have to do is give their cash to 'NMart' (in return for effectively unsaleable materials) and recruit their friends and relations to do the same. 

Gopal Shekawat posing in a Rolls Royce bought with stolen money

This means that 'Nmart' has had no significant or sustainable revenue other that deriving from a never-ending chain of contributing participants. In other words, victims of the 'NMart' fraud have actually been sold infinite shares of their own finite money.
In recent years, the republic of India has become infested with 'MLM income opportunity' frauds. Sadly, during the first decade of the 21st century, the once exclusively-American problem of closed-market swindles dissimulated as ‘lawful Direct Selling,’ and commonly-referred to as ‘Multi-level Marketing (MLM),’ has quickly become the most-common type of corporate fraud that citizens of the Indian republic are likely to encounter. In the absence of rigorous, independent regulation, the number of Indian-registered companies hiding these absurd, but nonetheless pernicious, swindles has continued to multiply year after year. Millions of Indians have already been left with piles of effectively-worthless wampum, wasted time, broken dreams, financial losses and debts. However, a significant percentage have not only been ruined, but they have also become dissociated from friends and relatives who refused to accept the 'MLM' fiction as fact. Yet, precious few Indians have been able to face up to reality and complain of fraud to the police. This has been due to the facts that ‘MLM’ victims:
  •  (like most fraud victims) find it hard to admit to the world that they were deceived.
  • are, almost without exception, incapable of explaining in accurate, deconstructed terms what they were involved in.
  •  are invariably recruited/deceived by a friend or relative and, in turn, try to recruit/deceive their own friends and relatives.
  • are manipulated by their instinctual desires and self-esteem and are, thus, persuaded to believe the scripted-lies that:
MLM’ participants are ‘Independent Business Owners’;

 ‘MLM’ participation is the result of an entirely 'free-choice';

 ‘MLM’ success requires sustained effort and belief, therefore, ‘MLM’ participants who lose money and give up, are "entirely responsible for their own failure';

 ‘MLM’ contracts oblige dissatisfied participants to enter into internal systems of 'dispute resolution'; 

‘MLM business opportunities’ are based on 'retailing products,' not just on recruiting more and more participants, and are, therefore, 'perfectly lawful';

 ‘MLM’ companies act with the 'full-approval of government';

 ‘MLM’ companies are rigorously self-regulated by ‘Direct Selling Associations’; ‘MLM’ companies are governed by strict ‘codes of ethics’;

MLM’ companies operate ‘money-back guarantees’;

 ‘MLM’ companies must be legitimate, because they support public charities and are endorsed by celebrities and opinion-makers;

MLM business opportunities’ have existed for decades and are allowed to operate around the world without official challenge, therefore, all persons openly-criticising them as pyramid scams and commercial cults, must be crazy, and/or unqualified, ‘conspiracy theorists, communists, liars, sociopaths, paid agents’ etc.

Although the self-perpetuating ‘MLM’ virus only began to infect India relatively recently, the problem was spawned in the USA as long ago as the mid-1940s - when the Indian sub-continent was still struggling to achieve independence from centuries of foreign rule. At that time, the technical-sounding term, ‘Multi-Level Marketing,’ was coined by a gang of three Narcissistic American charlatans as the first line of defence to avoid the charge that their controversial new enterprise appeared to be in breach of federal, and State, legislation designed to outlaw pyramid scams and money circulation schemes.
At the close of WWII, after encountering a pair of like-minded, criminal associates called Lee Mytinger and William Casselberry, Carl Rehnborg, the middle-aged German/American owner of a California-registered private company known as ‘Nutrilite’ (which already had a shameful history of peddling mystifying mixtures of cheaply-procured common substances, misbranded as ‘exclusive health tonics’and ‘food supplements,’ at around 1000% profit) discovered that he could dramatically expand the scale of his dissimulated criminal enterprise by using quasi-religious techniques to convert his most-vulnerable victims to the additional, self-gratifying closed-logic belief that the monthly purchase of around $20 of ‘Nutrilite’ products, and the recruitment of further levels of  unquestioning $20 per month ‘Nutrilite’ proselytizers, ad infinitum, could bring not just limitless health, but also limitless wealth, to anyone.
Although initially, their camouflage was pretty thin, the owners of the first two companies peddling a so-called ‘MLM income opportunity’ were not prosecuted for running a pyramid scam. Instead, Messrs. Rehnborg, Mytinger and Casselberry were quickly challenged by officials at the federal Food and Drug Administration for running an updated, and industrialised, version of an age-old pseudo-medical swindle, commonly known as ‘snake-oil selling.’ Indeed, in the late 1950s, after more than a decade of litigation, and counter-litigation, ‘Nutrilite’ appeared to be on the brink of compulsory closure under federal laws concerning the misbranding of medicines.

Rich DeVos, Jay Van Andel

In 1959, a copy-cat company known as the American Way Association’ or ‘Amway’ was hastily created in the Bible-Belt State of Michigan by two clean-cut young missionaries of the ‘MLM income opportunity’lie, Richard De Vos and Jay Van Andel. They were able to side-step further FDA prosecutions, simply by replacing the pseudo-medical ‘Nutrilite’ wampum with banal, but grossly over-priced, ‘Amway’household products. Perversely, the profitable ‘Nutrilite’ label was then quietly absorbed back into the essentially-identical ‘Amway’ fraud, but more than a decade later.  
During the 1970s, as a result of mounting complaints and press-exposure, the US Federal Trade Commission finally investigated, and attempted to close, ‘Amway/Nutrilite’ as a pyramid scam, but only when these companies were becoming an international problem. FTC officials discovered that the so-called ‘Amway income opportunity’ was an unviable closed-market (with virtually no external source of revenue), sustained by the endless-chain recruitment of losing-participants (who were falsely described in their contracts as ‘Independent Business Owners’), and from which the insignificant number of instigators had been secretly deriving millions of dollars of unlawful profits. Despite the fact that effectively 100% of ‘Amway’s’ unpaid proselytizers had been doomed to lose their cash during two decades, Messrs. De Vos and Van Andel were not prosecuted for fraud. Unbelievably, in 1979 they were allowed to maintain their corporate front and continue their clandestine criminal activities in the USA, when they were given a derisory $60 000 fine (for illegal price-fixing) and their attorneys steadfastly pretended affinity with the regulators by informing a federal judge that the previously-fixed exorbitantprices of ‘Amway’ products had already been voluntarily reduced and that ‘rules’ had also been voluntarily introduced which would oblige ‘Amway business owners’ to make significant, regular, retail sales in order to qualify for commission payments and, thus, produce a viable open-market. The subsequent acceptance these undertakings by senior FTC officials, but without creating any independent means of enforcing them, had the effect of authorizing the very crime which they ostensibly sought to prohibit. As a direct consequence of this grossly-incompetent failure to protect the public, countless copycat ‘MLM income opportunity’ frauds began to appear. Currently, the latest generation of ‘Amway’ bosses enjoy political protection in the USA. It has been estimated that since 1979, in excess of 10 millions US citizens have been churned through the ‘Amway’ fraud, and as many as 40-50 millions world-wide.
Even though the billionaire ‘Amway’ bosses steadfastly pretend to be compassionate capitalists/philanthropists - American patriots and Republicans who abide by a strict ‘code of Christian-inspired ethics’ and who operate with the full-approval of US government regulators, they (and their inflexible proselytizers) have long-since become widely-perceived by the American public as a crack-pot, right-wing ‘Prosperity Gospel’ cult; so much so, that the organization felt obliged to re-brand its tarnished corporate front as ‘Quixtar’ during the 1990s.
After surviving almost five decades of ill-informed, and isolated, enquiries and prosecutions, in 2007, a well-informed, and comprehensive, class-action lawsuit was filed (on behalf of US victims) against‘Amway/Quixtar’ in California, under federal anti-racketeering legislation (the RICO Act, 1970). This suit alleged that ‘Amway/Quixtar’ has been the main corporate front for a vast and highly-organized pyramid fraud, in which (year after year) fresh intakes of ill-informed victims have been deceived into handing-over unlawful payments to the instigators of the fraud (in exchange for effectively worthless products) on the pretext that the exact duplication of a plan of consumption and recruitment can lead anyone to total financial freedom. The suit  alleged that the tiny minority of decoy-participants who have been advertised by the ‘Amway/Quixtar’ organization as fabulously wealthy examples of success in the ‘Amway/Quixtar MLM business opportunity,’ actually derived the majority of their profits from secretly perpetrating a related-fraud, commonly referred to as the ‘Amway tool scam’. i.e. the use of apparentlyindependent corporate fronts (year after year) to procure, and to peddle, billions dollars of over-priced publications, recordings, tickets to meetings, etc., to the constantly-churning, insolvent victims of the‘Amway’ pyramid fraud, on the pretext that these ‘business building materials’ contain exclusive secrets which are vital to achieving success in the ‘Amway business opportunity.’ Furthermore, the suit alleged that all key-information revealing the cruel trap which lurks behind the attractive bait of the‘Amway/Quixtar’ Utopia, has (year after year) been deliberately occulted by the billionaire bosses of the organization and by their millionaire, de facto criminal associates.
After almost 3 years of delay (in which ‘Amway/Quixtar’s’ attorneys failed to invoke a clause in the plaintiff/victims’ contracts which appeared to take away their rights as US citizens to be heard in an independent court, and force them into a Mafia-style, rigged, internal system of dispute resolution), ‘Amway/Quixtar’s’ attorneys attempted to settle this RICO lawsuit. In exchange for the withdrawal of the suit (without the accused admitting fault), they agreed to hand over a total of $155 millions in compensation and costs. The ‘Amway’ organization has since tried to present this costly capitulation as a victory, but the precedent for successfully suing the ‘Amway’ bosses in US courts (under the RICO Act, 1970) has been clearly established.  

Currently, the reality-inverting ‘Amway’ propaganda machine proudly proclaims ‘450 000 Independent Amway Business Owners in India selling billions of Rupees of Amway product annually.’ 

Sadly, this sugar-coated, Indian adaptation of a poisonous American fairy story has been swallowed by many casual observers, including members of the Indian financial press. However, in order to put the mainstream media to sleep, all the usual thought-stopping tactics have been employed – expensive magazine and television advertising, gifts to charity, paid association with celebrities, membership ofthe ‘Indian Direct Selling Association,’ etc. Tellingly, no accurate, verifiable information has been offered by the corporate officers of ‘Amway India Enterprises,’ or those of the ‘Indian DSA,’ as to what percentage of the company’s (apparently impressive) market has comprised authentic, external, retail transactions (i.e. regular, lawful sales to members of the general public who are not themselves insolvent ‘Amway’ sales agents). It seems that, so far, no mainstream Indian journalist has bothered to ask this common-sense key question. 

Indian 'Amway Diamond' schills

Just a slightly more thoughtful approach from the Indian media would have revealed that ‘Amway/MLM’is the title for an absurd, but nonetheless pernicious, lie; for, without a sustainable, or significant, source of external revenue (largely due to the deliberately banal quality of products combined with exorbitant fixed-pricing), the so-called ‘Amway MLM Income Opportunity’ has been economically unviable and, therefore, fundamentally fraudulent under Indian legislation which defines, and outlaws, money circulation schemes. In reality, losing-participants in the ‘Amway’ closed-market have merely been peddled an infinite share of what can only be their own finite money. Furthermore, if the 50-60% average, annual churn rate is taken into consideration, we discover that more than one million aspiring‘Amway Business Owners’ have already vanished in India alone. Classically, only a core-group (less than 5%) of ‘Amway’ adherents (usually with access to independent funds) remain bedazzled by the Utopianmyth of ‘future total financial freedom’, for extended periods. 
As part of a pattern of ongoing, major racketeering activity (that now stretches back at least 50 years), in June 1994, representatives of the ‘Amway’ lie approached the Indian Ministry of Industry (Dept. of Industrial Development) bearing gifts. By steadfastly pretending affinity with officials (who, naturally, wanted to believe that all external investment creates employment), the ‘Amway’ crime families initially sought an agreement (renewable biannually) which simply paved the way for the creation a privately-controlled, unlimited-liability, commercial company, ‘Amway India Enterprises.’ As a subsidiary (entirely owned by its American parent company), the representatives of the ‘Amway’ lie meekly accepted that‘Amway India Enterprises’  would be forbidden to manufacture or import. The proposed company would be permitted only to use its ‘Multilevel Marketing Business Model’ to sell products sourced from local, independent, Indian manufacturers. Furthermore,  ‘Amway India Enterprises’ was obliged to file a separate agreement with the Reserve Bank of India, allowing the proposed subsidiary to transfer capital to, and from, its parent and, thus, act as a de facto, foreign exchange dealer. Consequently, without any informed scrutiny, officials at the Indian Ministry of Industry, Secretariat for Industrial Approval (Foreign Collaborations II Section) rubber-stamped the application for the proposed company (within less than two months) on August 26th 1994. Twelve months later, the company was registered after final approval by the Indian Foreign Investment Promotion Board. In this way, America’s contemporary version of the Trojan Horse was dragged unnoticed into India with the assistance of the country’s own na├»ve regulators. However, it lay dormant until May 5th 1998 when a network of regional offices began to be established. Six years later, the destructive contents finally began to spill out. On August 8th 2004, the (apparently safe) original (biannual) agreement was mysteriously altered (at the request of the corporate officers of ‘Amway India Enterprises’) allowing the unregulated manufacture, and/or importation, of ‘Amway’s’ own range of effectively-unsaleable household, beauty and health products. However, at no stage did Indian officials bother to ask how the so-called ‘MLM Business Opportunity’could possibly be lawful when ‘Amway’ products were now, self-evidently, several times the price of equivalent (and often superior) merchandise widely-available in traditional Indian retail outlets. Yet, implicit to the modified agreement was the understanding that ‘Amway India Enterprises’ would respect Indian law and recruit non-salaried agents who could earn commission payments from retailing products to the public. In plain language, Indian officials were deceived by the de facto agents of US-based racketeers. That said, it is not known what other inducements (if any) these conveniently-blind civil servants received.
The guts of above information comes from a landmark judgement given on July 19th 2007 against‘Amway India Enterprises’  by Chief Justice G.S. Singhvi, and Justice C.V. Nagarjuna Reddy, of the High Court of Judicature, Andhra Pradesh, Hyderabad. In 2006, the Criminal Investigations Dept. of theHyderabad police raided, and sealed, the local offices of ‘Amway India Enterprises’ arresting various employees, following a particularly detailed complaint filed by A.V.S. Satyanarayana under the ‘Prize Chits and Money Circulation (banning) Act, 1978.’  This courageous individual confessed that he had been deceived into wasting a significant amount of time and money after having being subjected to overwhelming psychological pressure to join ‘Amway’ by two dominant men in his own social circle. Within three days of the registration of this complaint, aggressive lawyers acting for ‘Amway India Enterprises’ issued two writs against the Hyderabad CID. Typically, ‘Amway’ posed as the innocent victim under attack. Ignoring all quantifiable evidence to the contrary, the lawyers steadfastly pretended thattheir employer’s ‘MLM Business Opportunity’ was perfectly lawful and that ‘Amway India Enterprises’ was acting with the full-approval of the Indian government. Therefore, the Andhra Pradesh police had neither reason nor authority to launch such a heavy-handed investigation, and, thus, damage, a legitimate business. At the same time, both the lawyers and corporate officers of ‘Amway India Enterprises’ tried to convince the world that Satyanarayana was a pathetic liar who had filed a malicious complaint as the result of a marital/financial dispute which had, itself, resulted in his pursuing a vendetta against members of his family who were ‘Amway Distributors.’ Ironically, it was ‘Amway India Enterprise’s’ own malicious writs which brought the company under the rigorous scrutiny of the Andhra Pradesh High Court.
Simply by applying common sense, Chief Justice Singhvi and Justice Reddy were immediately able to see that the ‘Amway’ fairytale is far too good to be true. Then, by ignoring the scripted-lies of ‘Amway’s’attorneys, and by concentrating on the compelling testimony of the victim (backed up by documentary evidence), they deduced that the so-called ‘MLM Business Opportunity’ is in breach of Indian legislation. Despite the mystifying, linguistic and mathematical complexity of ‘Amway’s’ corporate camouflage, de facto agents of the company actually propagate the self-gratifying delusion that limitless prosperity can eventually be obtained without any further effort simply by regularly purchasing products and recruiting others to do the same, etc., ad infinitum. As a consequence, the two writs were dismissed, and the High Court of Andhra Pradesh ordered that the Hyderabad Criminal Investigation Dept. should be allowed to continue to follow whatever procedures are permitted by law to hold the corporate officers of  ‘AmwayIndia Enterprises’ to account.
Self-evidently, the main beneficiaries of the ‘Amway’ racket in India, are not Indian citizens. Like the Empress of India in the 19th. century, the rulers of the ‘Amway’ Empire have no need to set foot in India. The only effective way for Indians to hold these wealthy liars to account would be to gather a token group of their destitute victims and then find well-informed US attorneys who are prepared to follow the now-established precedent and file a class-action lawsuit in the USA (this time, on behalf of all Indian victims of the ‘Amway’ lie) under US federal anti-racketeering legislation (the RICO Act, 1970). 

David Brear (copyright 2012)